Interview with the Minister of Finance, Gilles Roth

A year and a half after taking office, Finance Minister Gilles Roth reviews the Luxembourg financial center. Amid the consolidation of the banking industry, the development of sustainable finance, digitalization and international appeal, he discusses what can be done for Luxembourg to remain at the forefront between now and 2035.

What are the main challenges facing the financial center and, more specifically, the banking world?

The Luxembourg financial center is facing numerous challenges that are both structural and external. Digital transformation requires ongoing investment in technology and skills. Geopolitical tensions and regulatory fragmentation are weakening the international system on which our open model depends. Sustainability presents a strategic opportunity but requires firm action. Finally, as a highly international center, we are exposed to the volatility of global markets; hence, the importance of becoming even more resilient and diversified. We are, however, starting from a solid base: a robust, diverse financial center with big players in banking, insurance, investment funds, capital markets and fintech.

What does this mean in concrete terms?

We need to redouble our efforts in what we do best, which is providing a reliable, agile, and international platform. This means we need to invest in a quality regulatory environment, implement regulations quickly and clearly, and consolidate our position as a gateway to the EU for global financial institutions. With 118 international banks from over 25 countries - as well as hundreds of asset managers, insurers, and other financial institutions - Luxembourg owes its success to letting businesses operate and grow beyond its borders. By opening a subsidiary, they can access the ecosystem that we are developing. These institutions must be able to easily distribute their range across the European Union under the freedom to provide services.

How can we provide an even more dynamic environment for Luxembourg’s fund industry?

Luxembourg is now the world’s second biggest hub, with €7.3 trillion in assets under management. The industry’s growth relies on diversification, with strong potential to develop alternative funds, exchange-traded funds (ETFs) and also new European long-term investment funds (ELTIFs). Two thirds of the ELTIFs launched in Europe these past three or four months were created in Luxembourg. We will have to keep providing a dynamic, flexible environment in which these vehicles can prosper.

Some big names have decided to transfer funds from Luxembourg to Ireland in recent months. Should the financial center be worried?

Competition between financial centers is normal and healthy. We are trying to remain attractive by offering a globally recognized platform for cross-border distribution with access to more than 70 markets. Such international reach is unparalleled. We have taken practical measures to enhance our offering - such as abolishing the withholding tax on ETFs - and we are also following a pragmatic approach to regulation. You also have to look at the bigger picture: some managers may have relocated individual funds, but Luxembourg is making up considerable ground in other areas, especially with alternative investment products. The growth in ELTIFs, which are very topical in Europe, is a great example of this.

The take-up of technology is another essential driver of transformation, especially if we are to compete with all-digital operators. How do you facilitate this transition?

The adoption of new technologies is a big challenge. In the fund industry, tokenization is a tectonic shift in which we must play an active part. This means quickly implementing European cryptocurrency regulations to establish Luxembourg as the future base from which these assets are managed and distributed. Luxembourg is a pioneer in the field. The MiCA regulation took full effect in January 2025. The blockchain act was passed in December 2024. Many elements are already in place, such as HSBC’s Orion platform, which the EIB is using to issue digital bonds. Meanwhile, Franklin Templeton has launched a fully tokenized fund. We are very responsive to new needs for products and services.

The country is particularly appreciated for its socioeconomic stability. But how can you guarantee this in the long term?

As Finance Minister, it’s important for me to point out that our public finances are very healthy. Luxembourg ended 2024 with a budget surplus equivalent to 1% of GDP. We are among the strictest EU member states when it comes to fiscal discipline, justifying our AAA rating. Furthermore, our debt must stay below 30% of GDP. It currently stands at 24.7%, so we have improved our trajectory in difficult circumstances.

What’s your view of the Draghi and Letta reports, and the challenges of acting on them?

We agree with the findings of these reports, especially the Draghi one, about the need to make Europe even more competitive on the international scene, and to close the gap on the US and China when it comes to innovation. They make some good recommendations, which Luxembourg is backing, especially regarding the need to support the release of private money, including savings, to finance the European economy and let everyone seize the most attractive investment opportunities. This is why Luxembourg took part in discussions about the “Finance Europe” label suggested by our French counterparts.

The Draghi report also stresses the need to ease the regulatory and administrative burden on European companies. We couldn’t agree more. There’s a real need to make life easier for our firms, to reduce the regulatory and administrative pressure that’s weighing on them and eroding their competitiveness. The European Commission has already tabled some ambitious proposals for simplification. Others have been announced and we can only hope they will be just as far-reaching.

What more can Luxembourg do to strengthen its position on sustainable finance?

Luxembourg is already a global leader in sustainable finance but we are determined to go further, with a clear strategy and concrete measures. This is why my ministry launched a new sustainable finance action plan in 2024, setting out 10 priority areas for reinforcing our ecosystem, freeing up private money and ensuring that sustainable finance remains a cornerstone of our financial centre.

One of the main themes is the development of mixed finance solutions, which combine public and private resources to reduce the risk of investing in climate and development-related projects. Through partnerships such as those agreed with the EIB and SIFI, based in Switzerland, we are helping to increase financing where it is needed most. We are also emphasising the importance of financing gender equality, which has several benefits – not just in terms of fairness but also when it comes to making better economic decisions. To support our local ecosystem, we are strengthening the remit and resources of the Luxembourg Sustainable Finance Initiative, which has a vital role to play in stakeholder liaison, education and international awareness.

In recent months, several business leaders have complained about the difficulty of opening a bank account in Luxembourg. How do you respond to this issue?

It’s a concern that I take very seriously, as it can damage the image that people have of Luxembourg. As I mentioned earlier, our financial center is renowned for its pragmatism and solid legal framework. It’s therefore essential that we clarify the demands made and obligations imposed when accounts are opened. In this regard, I welcome the ABBL and CSSF joint initiative to more clearly define what expectations are held. Banks also have a commercial decision to make, but I’m absolutely convinced that it is in everyone’s interest to help businesses and the real economy. We just need to find some common ground so that banks can follow their rules while making it easier to open an account. If everyone knows what’s required in advance, then the situation is clear.

How do you attract new banking players?

Fully digital banking players are emerging all the time. With this in mind, Luxembourg must develop its legal framework to attract them and help them settle in. The development of neo-banks is a major trend that we cannot ignore.

That said, we are already home to several payment institutions, cryptocurrency firms, and digital finance leaders. They are here for the same reasons as everyone else: a stable, properly regulated international financial center with a multilingual workforce, legal security and clear decision-making.

The competitiveness of the financial center also depends on its ability to attract talent. However, it seems we’re having to look further and further afield, doesn’t it?

Although we have qualified professionals in Luxembourg and the Greater Region, we need to look abroad for some skills and, in particular, the talent that could help us drive the digital transformation. This talent is often found on other continents. This is why, when I first took up the job, I introduced a number of tax incentives to help attract and retain these workers. One involved a change to the “inpatriates” regime. Subject to conditions, foreign talent can receive complete tax relief on up to 50% of their annual remuneration, up to a ceiling of €400,000. This measure received positive feedback. We also took measures to help young talent find a home. More recently, as part of the 10-point joint action plan for developing startups, scaleups and the ecosystem, I announced tax breaks on stock options granted to employees of startups.

What’s your vision of the financial center in 2035? What will it look like?

I think the financial center will be more digital, more diversified, and even more international – in every area for which Luxembourg is renowned. We will have to move up the value chain. As well as mastering the operational aspects of the fund industry, we must attract fund promoters. To this end we are planning tax incentives for performance bonuses, which could be ready by the end of the year. This measure is designed to bring companies to Luxembourg and, crucially, host more types of business as part of a virtuous circle. Diversification will also involve technology, and we will have to remain at its cutting edge.

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